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MRC Global Q3 Earnings Beat; Revenues Fall on Headwinds

Renowned energy equipment and services company MRC Global Inc.MRC reported modest third-quarter 2015 results. Weak customer demand due to unfavorable conditions in the oil & gas commodity market, coupled with a strong U.S. dollar, partially offset the benefits reaped from the company's cost-saving and debt-reduction programs.

Diluted earnings per share came in at 10 cents, down 79.6% year over year. However, the bottom line surpassed the Zacks Consensus Estimate of 3 cents.

MRC Global Inc. (MRC) - Earnings Surprise | FindTheCompany

Revenues

MRC Global's revenues decreased 33.8% year over year to $1,071.2 million but came almost in line with the Zacks Consensus Estimate of $1,071 million. The year-over-year decline in revenues was primarily led by weak activities across all sectors and appreciation of the U.S. dollar.

Segmental Performance

MRC Global's U.S. sales for third-quarter 2015 totaled $865.4 million, down 28.2% year over year. The decline was primarily triggered by weak customer spending in all three sectors of the company.

International sales aggregated $136.4 million, down 45.8% year over year. Lower project-related activities and deferral in the repair, maintenance and operational expenditures in Europe, Norway and

Australia led to the decline in segmental revenues. Moreover, strong U.S. dollar was largely responsible for the year-over-year fall in revenues.

The company's top-line results for Canada fell 56.9% year over year to $69.4 million, hit by a strong U.S. dollar and lower upstream business.

Revenues by Sector

For third-quarter 2015, upstream sales were $378.8 million, down 49.7% year over year and accounting for 35% of gross revenue. Upstream sales were low due to dwindling customer demand.

Midstream sales totaled $370 million in the third quarter, representing 35% of total revenue. The company's midstream sales were down due to weak demand from transmission customers.

The company's third-quarter downstream sales fell 17.5% year over year to $322.4 million, accounting for 30% of total revenue. Poor sales generated in the company's Australian, Singaporean and European business hubs, and a strong U.S. dollar mainly resulted in the year-over-year decline in revenues.

Margins & Costs

Adjusted gross profit margin was 17.7%, down from 19% in the year-ago quarter. Selling, general and administrative expenses were $142 million, down from the year-ago value of $184.8 million. Adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") totaled $51.3 million, down from $132.3 million earned in the prior-year quarter.

Balance Sheet & Cash Flow

Exiting third-quarter 2015, MRC Global had cash balance of $32.9 million, up 31.4% from $25.1 million as of Dec 31, 2014. At the end of the first nine months of 2015, the company's long-term debt, net of current portion, decreased to $655.9 million from $1,445.7 million at year-end 2014.

In third-quarter 2015, MRC Global generated $480.6 million of cash from operating activities compared with $68.6 million used in the prior-year quarter. Total capital expenditure was $23.8 million compared with $10.1 million spent at the end of third-quarter 2014.

Outlook

Notwithstanding the unfavorable market conditions, MRC Global aims to improve its future business on the back of worthwhile long-term relationship with leading energy firms. The company also remains keen on improving its revenues and margins with the help of new acquisitions and portfolio-solidification initiatives. For 2015, MRC Global aims to strategically reposition its balance sheet, so as to realize its new share repurchase program for up to $100 million of common stock.

Stocks to Consider

MRC Global currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the industry include Agnico Eagle Mines Limited AEM , Atlas Iron Limited AGODY and Albemarle Corporation ALB . All three stocks hold a Zacks Rank #2 (Buy).

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AGNICO EAGLE (AEM): Free Stock Analysis Report

ALBEMARLE CORP (ALB): Free Stock Analysis Report

MRC GLOBAL INC (MRC): Free Stock Analysis Report

ATLAS IRON LTD (AGODY): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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